A group of heavily armed men have killed three soldiers and four civilians in an attack on an army base in Indian-administered Kashmir, the Indian army has said.

The fighting on Thursday came as the leaders of India and Pakistan attended a regional summit aimed at boosting trade between almost a quarter of the world's people.

Three soldiers were killed in the early morning attack and four civilians died in the crossfire, security officials said.

"The gunfight is going on. So far what we know from the unconfirmed reports is that three terrorists have been killed," Indian army spokesperson Manish Mehta told Al Jazeera's Baba Umar.

According to a local police official who spoke to Al Jazeera on the condition of anonymity, the gun battle started at 8:47 am (IST) when four to five rebels occupied one of the several abandoned army bunkers at Pindi Kathyaar, Arnia sector on the working border that separates the south-western portion of Kashmir into India and Pakistan-administered Kashmir.

Three wars

India and Pakistan fought two of their three wars since independence in 1947 over Muslim-majority Kashmir, which they both claim in full but rule in part.

Narendra Modi, Indian prime minister, and his Pakistani counterpart Nawaz Sharif are currently attending the annual South Asian Association for Regional Cooperation (SAARC) in Nepal. The leaders have avoided meeting each other.

Muslim separatists have been battling Indian forces in India's part of Kashmir since 1989.

India accuses Pakistan of training and arming the rebels in the part of Kashmir it controls and sending them to the Indian side, a claim its neighbour denies.

India and Pakistan exchanged their heaviest gunfire in a decade last month, killing more than 20 people.

Baba Umar contributed to this report from Kashmir.

Source: Al Jazeera and agencies